Earnings Surprise May Lift Stocks: Buy These Growth ETFs

Both the S&P 500 and the Dow Jones Industrial Average are hovering around 1% below their all-time highs, and the Nasdaq Composite is about 2% away from its record. The indices got a fresh lease of lift as the Q3 earnings season kicked off to a strong start lending optimism to the stock market.

This is especially true as 74 of the S&P 500 members that have reported results so far came up with a solid 83.8% beat on earnings and 59.5% beat on revenues though earnings are down 3% from the year-ago period. Market participants are betting on the record-high U.S. indices as about 120 S&P 500 companies, or around 24%, are scheduled to release their results this week. If this batch of companies reports solid earnings topping expectations, the stock market will undoubtedly surge to new highs.

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Most of the S&P 500 companies like Hasbro HAS, Biogen (BIIB - Free Report) , Chipotle Mexican Grill CMG, Procter & Gamble PG, eBay Inc. (EBAY - Free Report) , Microsoft (MSFT - Free Report) , Northrop Grumman Corporation (NOC - Free Report) , Comcast Corporation (CMCSA - Free Report) and Verizon (VZ - Free Report) , possess the above-mentioned combination.

Additionally, positive developments around Brexit and U.S.-China trade negotiations will likely drive the stocks higher.

If this happens, growth investing would be a better strategy. Growth stocks refer to high-quality stocks that are likely to witness revenue and earnings increase at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. As such, growth stocks tend to outperform during an uptrend. However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility when compared to value stocks.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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